Casino expansion getting $17m a year in public subsidies
by Peter Ladner on Friday, February 25, 2011
With the province now raising more public money from gambling than from corporate income taxes, it’s also worth questioning the value of gambling as economic development. Paragon Gaming’s proposed Edgewater Casino expansion at B.C. Place is promising to spin off millions of dollars every year to federal ($32m), provincial ($224m) and municipal ($23.5m) governments, plus $6m to B.C. Pavco to pay for the new stadium roof, with up to 1,900 new jobs contributing a total economic impact of $538m a year.
Unfortunately those numbers are only one side of the ledger. They take no account of the social costs this project, with each problem gambler estimated to cost the economy $13,200 a year. Nor do they spell out how much public money will be invested in this project and its social impacts, especially if it has to be bailed out. Remember what happened at the Olympic Village with similar unrealistic revenue projections, rushed deadlines, uncertain financing and public land-ownership?
This project wouldn’t be possible without heavy public subsidies. Deloitte’s Oct. 2010 study of the Edgewater expansion shows $16.9 million a year in government revenues being given back to Paragon as part of the B.C. Lottery Corporation’s program to upgrade casino premises. This is public money being used to support a private development competing with existing hotels.
Casino proponents are notorious for over-estimating revenues. When sots were first proposed at Edgewater, the city was promised $10-12m in annual revenues. Instead it has been getting just over $6m. For city revenues from Edgewater to jump from $6.2m today to the $17.2m being promised, business at the Edgewater’s new location would have to increase by 180%. When Burnaby’s Grand Villa Casino did a similar redevelopment, located in a far stronger local market, its business increased by just 6%.
Where would that business come from? It’s widely accepted that 90% of the gambling market in North America lives within 45 minutes of the casino, notwithstanding comments from Paragon CEO Scott Menke that tourists will be his focus. This casino, with its 1,500 electronic slot machines, will be catering mostly to a local market. It will cannibalize. At River Rock Casino Resort in Richmond, also a so-called destination casino, tourists are a small percentage of its market. Paragon is predicting that 200,000 people will be coming to its hotels annually “as a result of destination gaming demand by non-local visitors.” No data has been presented on where this number comes from. How many of these will be new visitors, and how many simply relocated from other hotels?
“This city doesn’t need another single hotel room,” says hotel industry veteran Angus Wilkinson. Yet this project will add 646 new rooms in a B location. PKF Canada reports declining hotel occupancy and room rates in Greater Vancouver in 2009 and 2010, partially offset by the Olympics, and forecasts a further decline in 2011. Wilkinson notes that at 70% occupancy, a new hotel in Vancouver has to make $400/room to be economically viable. No hotel is averaging even $250 a night. That’s why they’re all being built as mixed-used projects with condos (except the Coast Coal Harbour Hotel which benefited from a land swap with the former Coast property on Denman). Paragon’s proposed hotels are not viable without public subsidies.
Back in 1994, when the debate was raging in this city over whether to allow a Vegas-style casino on the harbour waterfront, Robert Goodman was addressing a U.S. Congress committee as director of the United States Gambling Study, based at the University of Massachussets. “Using gambling as government policy to create jobs and to supplement public treasuries is a dangerous form of economic development,” he warned. “As gambling proliferates, and local markets become saturated… what little discretionary consumer dollars still exist in these markets are being drained from other, already troubled local businesses. Not only are local economies further undermined by this process, but increased numbers of problem gamblers are adding new costs to government and to the operation of existing non-gambling businesses.”
Goodman’s estimate, which he describes as conservative, is that each problem gambler costs the economy $13,200 a year: “money which problem gamblers don’t pay back, work time lost …, salaries lost by those laid off because of their problems, private insurance losses through fraud by problem gamblers, and losses as a result of cheque fraud and embezzlement.” This is in addition to the public costs of policing and processing people through the criminal justice system. Problem gamblers are particularly susceptible to electronic slot machines, known as the crack cocaine of gambling in the industry. Edgewater wants to add 1,000 of these to its existing 520.
To say, as BCLC Chair Michael Graydon does, that the percentage of problem gamblers is not affected by the number of casinos in a city is to ignore the fact that the casinos take advantage of those problem gamblers. More casinos, more harm. An estimated 35% of revenues from electronic slots come from problem gamblers. These people can become so glued to the slot machines that they soil their pants rather than take a washroom break.
Investing in gambling moves us in the opposite direction from investment in productive, job-enhancing and economy-expanding industries, creating what Goodman calls “a regressive industrial policy with the gambling industry.”
Vancouver needs to take a hard look at this project’s unrealistic assumptions and hidden costs before believing it will add new dollars to our economy.
This column appears in Business in Vancouver, www.biv.com, Feb. 28, 2011
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Who’s putting up the money for Paragon Gaming’s expanded Edgewater casino at B.C. Place?
February 25th, 2011
Vancouver needs more answers about the Paragon Gaming’s expanded Edgewater casino at B.C. Place—and gambling in general.
The new casino at our premier community sports venue will add two football fields of gambling space, featuring 1,500 video lottery terminals (aka electronic slot machines), in the B.C. Place renovation. Once it is in, we can look forward to taking our children and grandchildren to soccer games and bumping into drug dealers with hockey bags full of $20 bills as we walk to our seats.
Proponents are trying to convince us that there are many jobs at stake, much revenue for the province and charities, and crime problems at casinos are no different than a shopping mall.
Really? Do Hell’s Angels try to infiltrate the management of shopping malls, the way the RCMP tell us they do at casinos? Has anyone been murdered coming out of a shopping mall, as happened at a Paragon casino in Edmonton? Do drug dealers launder money at shopping malls, then walk away without anyone saying anything? Do shopping malls have round-the-clock loan sharks on patrol with $20,000 floats, as has been documented at River Rock Casino at the murder trial of one of the shark’s employees?
But back to the business case. We hear a lot about the upside: the $450-million development with 646 new hotel rooms, restaurants, a theatre, 1,200 parking places and all those tax dollars. But no one is measuring the downside. We know that 35% of gambling proceeds come from problem gamblers who are, as former Attorney General Geoff Plant says, “one of this industry’s absolutely necessary byproducts.”
Here are some questions that should be answered before any expansion is approved.
Who is putting up the financing for this project? B.C. Pavilion Corporation (PavCo) chair David Podmore insists there’s no public money involved. But a Deloitte study on this casino shows $16.9m a year coming out of its revenues and being paid back to Paragon. Our money. Who else is financing Paragon?
Where will the proceeds go? What was once promised to the city from Edgewater wasn’t delivered. In 2004, Edgewater promised the city $10-12m a year. Then it went out of business, and today it’s paying $6.3m a year. What was once promised to the arts groups who backed the first slots in Edgewater (a better bingo hall on the premises) was never delivered. The province has no policy on splitting the take except that it’s leaving charities and arts groups behind. They get less money now than they did in 1995, even though provincial revenues from gambling are now bigger than revenues from corporate income taxes, topping $1 billion this year.
Who is behind Paragon? This is a company whose only U.S. property is the 15-slot Creek Bar and Grill in West Las Vegas and whose only other operations are a truck stop casino in Whitecourt Alberta, and the River Cree Casino in Enoch Alberta, a third the size of its Vancouver proposal. It’s a company that won the lease in a lightening-fast 11-week response to a Request for Proposals, with the former chair of BCLC, Richard Turner, sitting as a Paragon director after having invested in Paragon’s Alberta properties, without public disclosure, while he was still head of BCLC.
Who will take over if this project fails? We discovered the hard way at the Athlete’s Village what can happen under rushed deadlines when a private developer with uncertain financing wins a lease based on inflated revenue projections on property owned by taxpayers– and then can’t make the payments. Could PavCo end up running a money-losing casino if Paragon fails to live up to its promises?
Where will the customers for this casino come from? By all accounts, the casino market in the Lower Mainland is already saturated, which is why the existing Edgewater Casino went bankrupt and Hastings Park Racetrack is faltering. Paragon CEO Scott Menke says the focus is on “destination tourism”. Are international gamblers really going to fly here to gamble at slot machines at B.C. Place stadium?
Most importantly: Can our city not do better than this?
A previous version of this column originally appeared in Business in Vancouver, www.biv.com. For more information about this casino, visit http://dontgamblevancouver.wordpress.com/2011/02/16/summary-of-issues-edgewater-casino/
Is there no limit to the expansion of gambling in Vancouver?
February 25th, 2011
Is it just me, or does anyone else want to say “whoa” when they hear that we’re about to get the biggest casino in western Canada in the centre of Vancouver?
With barely a flicker on the political noise-meter until now, Las Vegas-based Paragon Gaming has finessed Edgewater Casino’s backwater pioneer of slots at the Plaza of Nations into a half-billion-dollar entertainment emporium straddling B.C. Place stadium.
The expansion has been cleverly bundled into a pile of other public decisions about rezoning, permission to relocate, remaking street fronts, rainwater recycling, a new roof on the stadium and enough other issues to fill a 55-page report to city council.
This is not a trivial expansion. The new casino floor will be triple the size of the current Edgewater casino, the size of two football fields. The number of gaming tables will double from 75-150. The number of slot machines, once described by a gambling supporter as the “crack cocaine of gambling”, is jumping from 520 to 1,500. That’s 50% more slot machines than in B.C.’s current biggest casino, River Rock.
This money-sucking vortex of entertainment will be fed by two hotels, six restaurants, a theatre and a cabaret—and, Paragon presumably hopes, a parade of boozy young adults coming in and out of football and soccer games.
It will be capped with a wildly-expensive publicly-financed retractable roof on the stadium, a project kept in place by a phone call from Paragon director Richard Turner to the cabinet minister in charge of B.C. Place, Kevin “children may-die-as-a-result-of-gambling-expansion” Krueger. Turner threatened to pull the casino if Krueger didn’t deliver the right roof. (Turner joined Paragon’s board six months after leaving his post as chair of the B.C. Lottery Corporation in 2005.)
We’re told there won’t be any public money involved, but what happens if the expected Chinese tourists prefer Macau, which offers immensely more gambling a lot closer to home? What if Paragon forfeits on its lease payments because of a faltering international gambling business climate?
This proposed casino, on its way to a city public hearing (Monday March 7, sign up to speak here) before final approval, is only a touch smaller than the harbourfront casino proposed by Mirage Resorts in partnership with VLC Properties in 1994. David Podmore, volunteer chair of B.C. Place owner PavCo today, was head of VLC properties then. Back then, owner Steve Wynn was chased back to Las Vegas by a sustained public outcry over the evils of gambling, a quaint concept long since trampled in the rush to spoils. Today the B.C. Lottery Corporation is the champion of the first government-run online poker games as it breaks through $2.5 billion in gross revenues. Where does this end?
More important, how is all this gambling affecting us? We really don’t know. Sure, it’s widely known that 35% of gambling profits—more from electronic games such as slots—come from “problem gamblers”, the kind of people who loot the family savings account and go home and assault their wives.
According to Douglas College criminologist Colin Campbell, B.C. has never had a genuine public review of gambling policies.
Who would do it when everyone’s on the take? Richard Turner donated $50,000 to the B.C. Liberals. Vision Vancouver has already tucked away $2,500 from Edgewater and $10,500 from Great Canadian Gaming, with Great Canadian giving another $35,000 to other Metro Vancouver politicians. B.C. has no arms-length agency assessing the true economic and social impact of expanded gambling.
Recent reports of suspected money-laundering revealed that while our rules may be strict, they’re not being enforced. B.C.’s integrated illegal gambling enforcement team formed in 2003 was disbanded in 2009, yet the RCMP talks openly about regulatory loopholes that allow organized crime to launder money through casinos.
At some point someone, somewhere, has to decide “enough”.
Don’t count on Vancouver city council. They stand to increase their gambling revenue win from $7 million a year to $17 million when the Edgewater expansion passes.
Casino city, here we come.
Or not: sign the petition if you want to stop this.